Cryptocurrency lending is an area that has been quickly gaining momentum. While the idea of using distributed ledger technology to offer traditional financial services is not new, the mainstream attention and adoption that crypto lending is starting to get is a great sign for the future. More and more institutions are starting to tap into the space and as they continue to do so, we can expect the lending market to become more and more accessible.
Cryptocurrencies are changing the landscape of lending, and without real-world collateral, the idea of cryptocurrency as a traditional loan may never take off.
Lending is a massive industry with trillions of dollars being lent every year. Banks, consumers, and investors are all impacted by the decisions that are made when it comes to debt and credit. While there are a lot of fears around cryptocurrencies, the fact is that they have the potential to transform the way many loans work at a fundamental level.. Read more about future of crypto in the next 5 years and let us know what you think.
Lending has existed in some form for thousands of years, going back to ancient civilizations when farmers borrowed seeds and repaid them with harvests.
The introduction of fiat currencies revolutionized the way economies were managed at the time. Indeed, as cryptocurrencies become a bigger and more important component of the global financial ecosystem, one might argue that we are seeing a seismic change.
When done correctly, crypto financing has the ability to level the playing field by providing customers with a degree of freedom they may not have had before. Bank interest rates have been sluggish to say the least for many years. Even the most generous savings accounts in certain nations yield less than 1% interest, even if the money are kept for many years.
Given recent significant increases in inflation, owing in part to money creation in reaction to the coronavirus epidemic, enrolling in one of these accounts implies that a saver’s money will have less purchasing value in the future.
When opposed to the current quo, crypto financing has three significant benefits. First, more competitive agreements may be found that guarantee money grows — with interest paid on a weekly or monthly basis in certain cases. Second, many platforms provide lenders with much-needed flexibility, allowing them to withdraw cash at any moment without being compelled to keep their money locked up for extended periods of time. Third, when markets are acting unpredictably, it may serve as a strong motivator.
That’s before we even consider how, from a lender’s perspective, crypto as collateral may be much more practical than real estate — an asset that is illiquid and can take a long time to sell.
Lenders aren’t the only ones that profit.
Of course, all of this seems to be a fantastic bargain for lenders — those with extra cash. Borrowers, on the other hand, may benefit from it. Crypto platforms may be a lifeline in the present financial environment, where a single blemish on an otherwise perfect credit history might prevent a responsible consumer from getting the greatest interest rates.
When it comes to identifying the individuals to whom they are ready to provide loans, banks often have a hazy list of criteria. And, in a world where a growing number of people work for themselves, otherwise creditworthy candidates may be turned down simply because they don’t have a conventional 9-to-5 job — regardless of whether they make more money in their present arrangement.
The crypto world can assist in fostering inclusiveness in this area, but there are obstacles to overcome. A lot of lenders in this sector are unregulated and offshore, which may make them less attractive to regular people. This also limits the number of financial relationships that crypto platforms may engage into.
Is there a new approach?
Baanx, a crypto-as-a-service fintech that aims to connect the worlds of crypto and fiat, is one platform that is trying to shake up the loan industry. The firm enables businesses to provide their clients and communities with interest-free secured loans as well as high savings rates for those who stake their digital assets. All of this is done via APIs that can be quickly incorporated into any DeFi, exchange, or wallet app or website.
Those that stake BXX, the utility currency connected with Baanx, are eligible for this kind of interest-free and low-cost secured financing. Loans may then be transferred to cryptocurrency wallets or real and virtual cards. Loan-to-value ratios of up to 50% are available for individuals who utilize Bitcoin and Ether as collateral, and approval may be obtained in a single click.
Baanx has a lending license and is on the FCA’s list of temporarily registered cryptoasset companies. “Any digital asset, including cryptos, equities, bonds, and the upcoming NFT asset class,” according to the project’s whitepaper.
The amount of money that may be lent will be determined by the number of tokens that are staked in the system.
Baanx claims to have sold over 600,000 white-label cards and accounts across the globe, almost entirely via branded corporate customers such as Tezos Crypto Life app, DeFi protocols, exchanges, and wallet providers, according to figures given by the company. In the fourth quarter of 2021, it plans to debut in the United States with a major wallet provider.
Cointelegraph does not support any of the information or products included on this website. While we strive to provide you with as much relevant information as possible, readers should do their own research before taking any actions connected to the business and bear full responsibility for their choices; this post is not intended to be an investment recommendation.
Since the beginning of time, people have had an expectancy of getting something of value in return for a given service or good. This is a deeply embedded belief that is part of our culture. For example, if you work at a restaurant and want something to eat, you’ll get something in return. This is a habit that is hard to break, and if one can’t get it from another person, they’ll go to the store where they will have a similar experience. The same goes for lending; the more we think lenders will get back in return, the more we’ll do it.. Read more about is bitcoin the future and let us know what you think.
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